Tag Archives: Leadership

In 1960, Douglas McGregor Laid the Foundation for The Engagement Formula

In 1960, Douglas McGregor laid a solid foundation for The Engagement Formula in his book, The Human Side of Enterprise.  Keep in mind, the term “employee engagement” was not in common usage at the time, but McGregor was fully aware of the low level of employee engagement that existed even then.  As he put it, “Many managers would agree that the effectiveness of their organizations would be at least doubled if they could discover how to tap into the unrealized potential present in their human resources.”   He reasoned that the traditional management model, which he referred to as management by direction and control denies individuals the opportunity to satisfy certain needs at work that are important to them.  As a result, using this management model actually prevents businesses from tapping in to the full potential of their employees.

The Reason Why Companies with a High Level of Employee Engagement Enjoy Superior Financial Results

The Engagement Formula by Dr. Ross Reck now available in Paperback and as a Kindle ebook from Amazon.com

The reason companies with high levels of employee engagement enjoy superior financial performance is they treat their employees in ways which bring out their best at work.

Their engaged employees, in turn, respond by creating a competitive edge for their company that can’t be easily copied—they’re constantly making innovative improvements to products, services and customer experiences while providing superior levels of customer service which results in loyal customers.

This means higher levels of repeat and referral business which, in turn, translates into significant increases in market share.  In addition, companies with high levels of employee engagement enjoy substantial cost savings due to reduced employee turnover, absenteeism, accidents and employee theft.

Why the Level of Employee Engagement is So Important

The term “employee engagement” is used to describe a situation where someone is excited about coming to work and working hard.  When employees are engaged with their work, they give most all of their energy, creativity and passion to performing their jobs.  The level of employee engagement is extremely important to the success of a business organization because it’s the primary driver of its financial performance.  For example, consulting firm Towers Perrin looked at 50 global companies over a 12 month period and found a direct relationship between the level of employee engagement and company performance.  They found that the companies with a high level of employee engagement had a 19 percent increase in operating income and nearly a 28 percent increase in earnings per share.  On the other hand, the companies with low levels of employee engagement experienced a drop in operating income of more than 32 percent while earnings per share fell more than 11 percent.

Regarding another dimension of financial performance, Alex Edmans, a finance professor at the University of Pennsylvania’s Wharton School tracked the stock performance of the Fortune magazine 100 Best Companies to Work For in America from 1984 through 2009.  He found that the stock prices of these firms, which have high levels of employee engagement, consistently outperformed the market.

Regarding another dimension of financial performance, Alex Edmans, a finance professor at the University of Pennsylvania’s Wharton School tracked the stock performance of the Fortune magazine 100 Best Companies to Work For in America from 1984 through 2009.  He found that the stock prices of these firms, which have high levels of employee engagement, consistently outperformed the market.

Regarding another dimension of financial performance, Alex Edmans, a finance professor at the University of Pennsylvania’s Wharton School tracked the stock performance of the Fortune magazine 100 Best Companies to Work For in America from 1984 through 2009.  He found that the stock prices of these firms, which have high levels of employee engagement, consistently outperformed the market.

Along these same lines, AON Hewitt found that organizations with high levels of employee engagement outperformed the total stock market index and posted total shareholder returns that were 22 percent higher than the average in 2010.  On the other hand, companies with low levels of employee engagement posted a total shareholder return that was 28 percent below the average.

Clearly, having a high level of employee engagement is a very desirable state of affairs for a business organization to have.

The Acid Test for True Leadership

The Future of Management - Kindle book available from Amazon.com

Recently I came across an article posted on the online version of the Wall Street Journal.  In the article, which was titled, W. L. Gore: Lessons from a Management Revolutionary, management author, Gary Hamel, interviewed Terri Kelly, the CEO of W. L. Gore and Associates.  This extremely profitable and innovative company is known for not having a formal hierarchy or titles, but it does have leaders.  At one point, Mr. Hamel asked how someone became a leader at W. L. Gore.   Here’s how Ms. Kelly responded: “One of my associates said, ‘If you call a meeting, and no one shows up, you’re probably not a leader, because no one is willing to follow you.’  At Gore, the test of leadership is that simple: are others willing to follow you?  We use a peer review process to identify the individuals who are growing into leadership roles.”  This means that at W. L. Gore, your right to lead is based on your ability to attract followers.  This is true leadership.  Under the traditional management model which is used by most companies, the right to lead comes with your title.  This is “hit-or-miss” leadership and it’s mostly “miss.”  This gives the leadership advantage to companies like W. L. Gore.

We’ve Been Searching for a New Management Model for a Long Time

Fifty years ago, Douglas McGregor concluded that a new management model was necessary if businesses were going to succeed in tapping into the unutilized potential of their employees.  He knew the effect he wanted to achieve; he called it the Principle of Integration where the job of a manager is to create a set of conditions such that employees could achieve their own goals best by directing their efforts to the success of the business.  In other words, the harder employees work for the success of the business, the more satisfaction they experience regarding their personal needs.  The problem, however, is that McGregor couldn’t figure out a management model to make this happen.  The purpose of my new book is to finish what McGregor started.

Most Companies Do a Lousy Job of Engaging Their Employees

Towers Perrin, in their Global Workforce Study which involved 88,600 employees across 18 different countries found that only 21% of the workforce was engaged.  This means that only one in five employees are willing to do whatever it takes to make their company successful.  On the other hand, nearly 80% are not working anywhere near their potential—they’re putting in time, but little energy and passion, sleepwalking through their day or actively undermining the positive things that their company is trying to accomplish.  Just think of how successful a business could be if it could figure out how to tap into that unutilized potential.  My new management model will show you how to do just that.

Are You a Leader?

Recently I watched a couple of reporters interview Clint Hurdle, the new manager of the Pittsburgh Pirates Major League Baseball team.   They asked him how he planned to win his new team over during Spring Training so that they would be excited about playing hard and winning.  He said that when a baseball player looks at a new manager he asks himself three questions:  “Can he make me better?  Does he care about me? Can I trust him?”  He went on to say that if you convince them the answer is “yes” to all three questions, they’ll play their hearts out for you.   The same thing is true in business.  As a team leader, supervisor, manager or executive, if you make people better, care about them and they can trust you, they’ll follow you just about anywhere.  This is what leaders do.

If We Can’t Herd Cats, What Makes Us Think We Can Herd People?

Recently I asked a group of seminar participants from Rolls-Royce why it was impossible to herd cats.  One of the participants immediately answered, “Because cats don’t like being herded.”   On the other hand, if you shake a can or box of cat treats so they can hear it, cats will follow you just about anywhere.  The same logic holds true for people.  Provide them with opportunities to satisify important needs instead of trying to control or herd them and they’ll bend over backwards for you.  This is the difference between management and leadership.

The Secret to Being an Effective Boss

The secret to being an effective boss is to recognize that people intentionally regulate the amount of effort they put into their jobs based upon how they feel they’re being treated.  If they feel they’re being treated well, they will become excited about giving their absolute best efforts which means they’ll work way beyond their job descriptions.  If they feel their efforts are unappreciated they’ll pull back and do only what they have to do to keep their jobs.  And, if they feel they’re being abused, they’ll either figure out some clever way to get even or they’ll look for a job somewhere else.  The lesson here is that if you treat your people well–treat them with respect and show them you care–they’ll return the favor by making you look like a genius as their boss.

Ken Blanchard endorses Instant Turnaround!

I just received great news about my new book which is going to be released on April 21st that Ken Blanchard, the coauthor of One Minute Manager, has endorsed the manuscript saying, “The best leadership advice for creating a great organization comes from simple truths. Instant Turnaround is full of these truths. Harry Paul and Ross Reck nail what it takes to get people excited about coming to work and working hard. Read this book.”  Wow!  This is great news for me…. I’m really excited. – – Ross Reck, author of Instant Turnaround!RossReck.com